In what may be the first case of its kind in the United States, a District Court in California has dismissed U.S. EPA's cost recovery claims with respect to a Superfund Site due to the failure of the Department of Defense ("DoD") to assert counterclaims in a prior litigation matter relating to the same general contamination. SeeCity of Colton v. American Promotional Events, Inc.Federal Rule of Civil Procedure 13(a) requires that a party must assert as a counterclaim any claim that arises out of the same transaction or occurrence that is the subject matter of the opposing party's claim and that does not require adding any party over whom the court cannot acquire jurisdiction. The purpose of the rule is to bar any party that fails to assert a compulsory counterclaim in one action from instituting a second action in which the counterclaim is the basis of the complaint. The wrinkle in the Colton case, however, or at least the argument advanced by DOJ, was that DoD was the party in the first case and U.S. EPA was the party in the second case. Therefore, DOJ argued that Rule 13(a) did not apply. The Court rejected this argument, noting that CERCLA does not distinguish between different agencies of the United States. The Court concluded that the failure of DoD to assert counterclaims against the other defendants was fatal to U.S. EPA's ability to file a cost-recovery claim arising out of the same general contamination. Although this decision is likely to be appealed, in the interim, it may provide parties with a defensive sword to seek dismissal of U.S. EPA claims where other instrumentalities of the United States were involved in prior litigation with respect to the same general contamination. It also provides a sobering reminder as to the need to assert counterclaims at the earliest possible opportunity.